ECON Chapter 6
Although only -(a)- percent of all firms are corporations, corporations account for the -(b)- of revenue and profits.
(a)- 20 (b)- The majority
A flow of funds from savers to borrowers through financial intermediaries such as bans is -(a)- finance, while a flow of funds from savers to firms through financial markets, such as the New York Stock Exchange is -(b)- finance.
(a)- Indirect (b)- Direct
Economic profit is equal to a firm's revenues minus its costs, -(a)-. Accounting profit is -(b)- economic profit.
(a)- both explicit and implicit (b)- larger than
The price investors are willing to pay for a financial asset should be -(a)- the value of the payments they will receive as a result of owning the assets
(a)- equal to
Partnership is
A firm owned jointly by two or more persons and not organized as a corporation.
The principal- agent problem occurs when
An agent pursues his own interests rather than the interests of the principal who hired him.
An income statement shows a firm's A. Profits B. Costs C. Revenues D. All of the above
D. All of the above
The owners of corporations have
Limited liability
Present Vale Formula
Present Value= (present value)/ (1+ interest rate)^time
The landmark legislation that helps guard against inflated profit and hidden liabilities on balance sheets to protect against Gina gel scandals is the
Sarbanes-Oxley Act of 2002
Stock Price Formula
Stock Price = (Dividend)/ (interest - growth rate) Convert percentages to decimals
Changes in the value of firm's stocks and bonds offer important information for a firms agency. If the price is increasing investors are _____ and are providing information that indicates the firms managers might want to _____ the business.
more optimistic; expand
Subtracting the value of a firm's liabilities from the value of its assets leaves its
net worth
A(n) _____ is a fin shel security that represents partial ownership of a firm, while a ____ is a financial security that represents a promise to repay a fixed amount of funds.
stock; bond
